ISLAMABAD: Finance Minister Muhammad Aurangzeb announced on Thursday that the government will significantly ramp up enforcement actions against informal and unregulated sectors that are failing to contribute to the national economy. Addressing the Pakistan Retail Business Council (PRBC) Conference 2025, titled “Retail Re-imagined: Innovate, Collaborate, and Thrive,” Aurangzeb emphasized the government’s commitment to bringing undocumented sectors into the formal economy through increased documentation and digitization.
During his address, the Finance Minister highlighted the tobacco and beverage sectors as prime examples where the formal sectors are contributing taxes while the informal sectors remain untaxed. He pointed out that this disparity is unsustainable, particularly when the salaried class, which is already heavily taxed, continues to bear the brunt of the tax burden.
Aurangzeb stressed that other sectors, such as retail, wholesale, real estate, and agriculture, must also step up and contribute their fair share in taxes. “The salaried class, manufacturing, and services sectors are overburdened with taxes, and this model is no longer sustainable,” he stated. According to him, the informal sectors must be held accountable for their share of taxes to ensure the country’s fiscal health.
A key focus of the Minister’s speech was the retail sector, which contributes 19 percent to Pakistan’s Gross Domestic Product (GDP) but contributes only 1 percent in taxes. This significant gap, Aurangzeb argued, has to be addressed for the broader good of the nation. The government has already initiated engagement with the retail sector to formalize its businesses and ensure that businesses pay taxes. “We cannot afford to have people taking a free ride anymore,” he emphasized, calling for a shift toward greater transparency and documentation.
In line with this vision, the Federal Board of Revenue (FBR) has issued a new Statutory Regulatory Order (SRO) to limit the submission and uploading of manual sales tax invoices. This move is expected to facilitate the transition to a more formal and digitally-enabled economy. Aurangzeb explained that there is an estimated 9.4 trillion rupees circulating in the informal economy that needs to be brought into the formal sector. However, he clarified that achieving this transition would take time and would not happen overnight.
Despite the challenges, Aurangzeb expressed confidence that Pakistan is on the right path. The Finance Minister emphasized that the government is committed to implementing structural reforms to avoid boom-and-bust cycles and move toward a more sustainable and inclusive growth model. These reforms are already underway, focusing on key areas such as taxation, energy, state-owned enterprises (SOEs), and public finance.
On the taxation front, Aurangzeb noted that Pakistan is undergoing a real transformation, with a heavy emphasis on utilizing the latest technology to improve transparency and reduce tax leakage. “Restoring trust and credibility in the tax authority is essential,” he added, acknowledging that Pakistan’s large population and the scale of its economy demand a more effective tax system. He further mentioned that the government is working toward ensuring that more citizens are willing to engage with the tax authority.
Regarding the energy sector, Aurangzeb confirmed that the government is implementing tough measures to move toward competitive energy markets. This includes working toward reducing inefficiencies and ensuring that energy costs align with market realities.
The Minister also provided an update on the progress of SOE reforms, stating that the rightsizing process is expected to be completed by June this year. He also assured that the privatization process would continue, with a specific mention of the Pakistan International Airlines (PIA), which is set to be relaunched under a new framework.
Finally, Aurangzeb touched on Pakistan’s ongoing engagement with international rating agencies, aiming for an upgrade to the “Single B” credit rating category. He highlighted the country’s progress in this regard, noting the positive credit rating upgrades received in the previous year. The Finance Minister expressed optimism that Pakistan would secure further upgrades, which would have significant implications for the country’s economic prospects.
In conclusion, the Finance Minister’s remarks underscore a critical shift in Pakistan’s economic policy, with a focus on greater accountability, transparency, and the formalization of sectors that have long operated outside the regulatory framework. As the government continues to implement these reforms, Pakistan aims to foster a more stable and inclusive economic future.